Moroccan telecom sector gets competition regulation

AAT has learned that the fledgling Moroccan antitrust regime, which has never quite come off the ground, is now being supplemented in a sector-specific regulation, namely the recently gazetted Droit [Law] no. 121.12.

The new law supplements the competition guidance specifically for telecommunications carriers, including high-speed internet and fibre-optic cable service providers, without repealing the main piece of antitrust legislation (Law no. 104.12 on the Freedom of Prices and Competition), whose key regulatory body — the Competition Council (Conseil de la Concurrence) — only recently became active in December 2018.  Law 121.12 now confers full investigative authority to the National Telecommunications Regulatory Agency (ANRT), which it enables to review complaints of anti-competitive behaviour, roaming agreements between competitors, and the like.

Andreas Stargard, a competition practitioner with Primerio, notes that “the law is primarily focussed on conduct issues and does not cater for any transactional / merger regulation, which remains the province of Law 104.12 and its crucial (and much debated) ‘40% domestic market share’ hurdle for notifications in the Kingdom.”  Stargard notes that the Competition Council’s web site is still — despite the agency’s recent personnel appointments — merely an “empty store-front of a site, without any substantive content.”

The new telecom-specific regulation is likely to have an impact on, and was influenced by, the limited state of play in the sector, which has been dominated for decades by state monopoly Maroc Telecom, whose would-be competitors such as Orange and Inwi have recently filed complaints against the dominant firm, mostly for refusals to deal, being denied access to indispensable networks, roaming agreements, and the like.

Says Stargard: “The new law will take such disputes out of the lengthy judicial process in court and allow the ANRT to investigate and render decisions on its own, including the power to fine up to 5% of a company’s turnover.

We will update AAT once further details become available.

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Antitrust in the Digital Economy: Fighting Inequality?

AAT the big picture

HOW CAN COMPETITION LAW ENFORCEMENT IN THE DIGITAL ECONOMY HELP IN THE FIGHT AGAINST POVERTY?

By DWA co-founder and visiting AAT author, Amine Mansour* (re-published courtesy of Developing World Antitrust’s editors)

When talking about competition law and poverty alleviation, we may intuitively think about markets involving essential needs. The rise of new sectors may however prompt competition authorities to turn their attention away from these markets. One of those emerging sectors is the digital economy sector. This triggers the question of whether the latter should be a top priority in competition authorities’ agenda. The answer remains unclear and depends mainly on the potential value added to consumers in general and the poor in particular[1].

Should competition authorities in developing countries focus on digital markets?

Obviously, access to computer and technology is not a source of poverty stricto sensu. In the absence of basic needs, strategies focusing on digital sectors may prove meaningless. In practice, the last thing people living in extreme poverty will think about is gaining digital skills. Their immediate needs are embodied in markets offering goods and services which are basic necessities. The approach put forward by several Competition authorities in developing countries corroborates this view. For instance, in South Africa, digital markets are not seen as a top priority. Instead, the South African competition authority focuses on food and agro-processing, infrastructure and construction, banking and intermediate industrial products.

There are however compelling arguments to be made against such position. Most importantly, although access to technology and computers is not a source of poverty, such an access can be a solution to the poverty problem. In fact, closing the digital gap by providing digital skills and making access to technology and Internet easier can help the low income population when acting either as entrepreneurs or consumers. In both cases competition law can play a decisive role.

The low income population acting as consumers

First, when acting as consumers, people with low income can enjoy the benefits of new technology-based entrant. Thanks to lower costs of operation, lower barriers to entry and (almost) infinite buyers, these new operators have changed the competitive landscape by aggressively competing against traditional companies. These features have helped them not only extending existing products and services to low-income consumers but also making new ones available for them. Better yet, in some cases increased competition coming from technology-based companies motivates traditional business forms to adapt their offer to low-income consumers so as to face this new competition and remedy shrinking revenues. Perhaps, the most noteworthy aspect of all these evolutions, is that these new entrants have, in some instances, been able to challenge incumbents’ position by driving prices downward to levels unattainable by traditional companies without scarifying their profitability.

A shining example of all this dynamic is the possibility for low-income consumers to engage, thanks to some mobile companies, in financial transaction without the need to pass through the traditional stationary banking infrastructure. For instance, in Kenya, M-PESA a mobile money transfer service that has over 22 million subscribers[2] and around 40,000 agents (around 2600 Commercial bank branches)[3] changed the life of million of citizens. The service enables clients to deposit cash into their M-PESA accounts, send or transfer money to any other mobile phone user, withdraw cash and complete other financial transactions. A farmer in a remote area in Kenya can send or receive money by simply using his mobile phone. In this way, M-PESA can act as a substitute to personal bank accounts. This experience shows how the digital economy helps overcoming the prohibitive costs of reaching low-income customers and thus raising living standards.

On that basis, we can easily imagine the counter-argument incumbent companies might put forward. In this regard, unfair competition and the need for regulation to preserve policy objectives are often in the forefront. However, there is a great risk that these arguments are simply used to restrict market entry and impede competition from those new players.

In fact, this kind of arguments do not always reflect market reality. For example, in some remote geographic areas, traditional companies and the new ones based on the digital/internet space do not even compete directly against each other. Accordingly, regulation intended to protect policy goals has no role to play given that the affected consumers are out of the reach of the traditional business. In the M-PESA example, it may be possible to argue that any operator engaging in financial transactions should observe the regulatory restrictions that apply to the banking sector in order to ensure that policy objectives such as the stability of the banking system or the protection of consumer savings are preserved. However, applying such a reasoning will leave a large part of consumers with no alternative given the absence of a banking infrastructure in remote areas. The unfair competition and regulation arguments may only hold in cases where consumers are offered alternatives capable of providing an equivalent service.

This shows the need to proceed cautiously by favoring an evidence-based approach to the ex-post use of the regulation argument by incumbent operators. This is however only one of different facets of the interaction between the competitive impact of companies based on the internet-space, the regulatory framework and the repercussions for people with low income[4].

The low income population acting as entrepreneurs

Second, the focus on digital markets as way to alleviate poverty is further justified when low-income people act as entrepreneurs. In fact, digital markets are distinguished from basic good markets in that they may act as an empowering instrument that encourages entrepreneurship.

More precisely, the digitalization of the economy results in an improved access to market information which in turn may benefit entrepreneurs especially the poor whether they intervene in the same market or in a different one. Practice is replete with cases where, for instance, a downstream firm heavily relies for its production/operation on services or products offered by an upstream company operating in a digital market. Similarly, in a traditional and somewhat caricatural way, a small-scale farmer may use VOIP calls to obtain market information or directly contact buyers suppressing the need for a middleman.

However, we can well imagine the disastrous consequences for these small-scale farmers or the downstream firm if mobile operators decide to block access to internet telephony services such as Skype or WhatsApp based on cheap phone calls using VOIP (this is what actually happened in Morocco). In such a case, the digitalization of the economy has clearly contributed to greatly lowering the costs of communication and distribution. However, low income entrepreneurs are prevented from benefiting of these low costs, which are a key input to be able to compete in the market.

The major difficulty here lies in the fact that, when low income people act as entrepreneurs, it is likely that they organize their activities in small structures. This result in relationships and structures favorable to the emergence of exploitative abuses. Keeping digital markets clear from obstructing anticompetitive practices is thus indispensable to ensure that small existing or potential competitors are not prevented from competing. This might not be easily achieved given that competition authorities’ focus is sometimes more on high profile cases.

*Co-editor, Developing World Antitrust

[1] Intervention may also be justified by the institutional significance argument. This significance lies in the fact that those markets are growing ones and challenging the common ways of both doing business and applying competition rules which in turn make it crucial for authorities to intervene by drawing the lines that ensure the right conditions for those market to grow and develop.

[2] http://www.safaricom.co.ke/about-us/about-safaricom

[3] http://www.safaricom.co.ke/personal/m-pesa/get-started-with-m-pesa/m-pesa-agents

[4] For instance, it possible to think of the same problem from an ex-ante point of view highlighting incumbent firms’ efforts to block any re-examination of the regulatory standards that apply to the concerned sector (no relaxation of the quantitative and qualitative restrictions). This aspect has more to do with the advocacy function of competition authorities.

International Competition Network meets in Morocco

The International Competition Network‘s 13th annual conference — being hosted by Morocco’s King Mohammed VI at the “Palmeraie Golf Palace” — concludes today.  It is the second ICN event in recent memory to take place on African soil since the October 2013 ICN Cartel Workshop in Cape Town, South Africa.

The conference web site’s headline points out, somewhat vaguely, that the event is “more than a meeting, it’s our future“, perhaps implying that competition law is essential to this African nation’s future economic growth — a fact that bodes well for the enforcement activities of the thus-far largely dormant Moroccan Conseil de la Concurrence, an agency that has notably seen its budget slashed by over a quarter to a mere $1.74m in 2012 (last available year of its annual reporting).

Moroccan ICN conference site

Substantively, one of the key topics discussed at the event is the question how antitrust enforcers should deal with state-owned enterprises (SOEs).  Especially in emerging ICN member countries (including many African nations with relatively young competition-law authorities), this topic is hotly debated, as their economies are transitioning from a largely SOE-dominated environment to a more open and competitive one.  The Moroccan Conseil has therefore created a “Special Project” on the issue, including a survey to be distributed to members, outlined as follows:

The Moroccan Conseil de la Concurrence (MCC) wishes to address the issue of competition enforcement in relation to State Owned Enterprises (SOEs) as the Special Project for the 2014 ICN Annual Conference. The MCC wishes to address this issue not only because it is a hot-topic in developing economies, but also because of the liberalization of markets, this may lead to the revocation of exemptions for certain SOEs and subsequent investigation of competition infringements as an issue of interest for all ICN members.

One of the biggest economic dilemmas is how far a government should supply goods and services. In many developing economies, government intervention and the creation of public enterprises is a common way to cope with the need for economic and social development in key sectors. However, once a sector has reached sufficient maturity, the need for a SOE often decreases.

Many jurisdictions face the legacy of SOEs, some of which are entirely exempted from the ambit of competition enforcement. Once the economy is ripe for private sector entrants, it can be difficult to dislodge SOE supported monopolies. It is noted  that this situation has created shortcomings in performance, competitiveness and operating systems in some sectors.

Looking at Morocco as an example, the country adopted in 1989, a law pertaining to the privatization of SOEs and started to implement a liberalization process of an important part of its economy. In 2000, this whole process culminated in the adoption of a law on freedom of prices and competition, thus marking the end of a long period of price control and restriction of competition.

All these elements lead Morocco naturally to question the position of SOEs relating to competition rules, especially in the current context of the reform of Moroccan competition law.

So what do we mean by SOEs in the context of this project? In our opinion, SOEs are those publicly owned enterprises created to ensure that a public need for a product and/or service is fulfilled and universally accessible.

Generally, a SOE must provide coverage to all consumers, irrespective of geographical location at regulated prices. As the Moroccan government has deemed that the service which the SOE provides is necessary for the well-functioning of the state, a SOE must be in a position to guarantee consistent supply, which includes a requirement to have reserve/standby capacity available at all times for possible peaks.

There are also SOEs that may have purely commercial activities without any goal of general interest satisfaction.

Although most jurisdictions assess SOEs under competition law, there are often a few exemptions for certain sectors or businesses. These SOEs are then exempted from falling under competition law and potentially other national laws (sovereign immunity). When the exemption is created, the purpose is generally to ensure that a nascent industry has enough financial (and political) backing to survive.

SOEs are generally put in place where the provision of essential goods or services may be at risk. In some sectors, the market may fail to provide essential goods or services as a result of a private enterprises’ inherent desire to minimize risks, for example, risk selection which might otherwise occur in the health care or education sectors and in other markets, based on infrastructure networks, the incentive (or means) to carry out the initial investment may be lacking or may lead to natural monopolies (telecom, post, rail, gas, electricity)

One of the issues this Special Project wishes to address is whether (and to what extent) an exemption which excludes a SOE from the purview of competition enforcement is appropriate in view of the public interest objective. SOEs that do not face free competition may lack an incentive to be innovative or to be efficient, for example to search for the cheapest – yet most effective materials or means of production to provide a certain good. This is linked to the question of how (or to what extent) governments and competition authorities can (re)introduce a certain sector, or business, to the forces of competition. A related issue is the question of whether competition authorities can have a role to play in encouraging a sector, or a SOE within that sector, to evolve in such a way as to ensure the eventual maturity of the market so that a SOE or an exemption for a SOE from competition law is no longer necessary to provide the state with the needed services/products.

A further issue this Special Project wishes to address is the potential difficulty in ensuring that competition enforcement involving SOEs is effective. For example, how do members deal with political and social pressure; and what can members do to ensure that sanctions serve a deterrent purpose.

This brings us to the final issue the MCC wishes to address within the ambit of this Special Project, namely, advocacy and guidance efforts. How can a competition authority best explain to the government why the inclusion of SOEs within the jurisdiction of competition rules will lead to better conditions for consumers?

The MCC wishes to gather information on this topic for the purposes of an information sharing experience among ICN members on the more practical aspects of investigating SOEs. It is thought that the discussions which spring from this Special Project will help all ICN members in understanding regulated sectors and their advocacy efforts.

The three core issues identified above are vital to the daily work of many newer competition authorities and of mature competition authorities in emerging economies. Although many excellent papers have been written by the ICN Unilateral Conduct Working Group, the Organisation for Economic Co-operation and Development and the World Trade Organization, as well as several academics, very few of these articles touch upon the above mentioned practical implementation issues.